Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher although there appears to be no specific news out since Friday’s close that would account for today’s gains.
The 9:00 central time July wholesale inventories report is expected to show a 0.3% increase.
The 2:00 July consumer credit report is anticipated to show a $12 billion increase.
Investors will be watching out for two key inflation reports that could influence Federal Reserve policy. The August consumer price index report will be released on Wednesday and is expected to show a 0.2% increase, and the August producer price index report will be released on Thursday and is forecast to show a 0.2% gain.
Futures have performed much better than the news would suggest today, which indicates traders are looking beyond recent economic reports to some other not yet obvious bullish fundamental.
CURRENCY FUTURES
The U.S. dollar index Is higher due to a substantial decline in the probability of a 50 basis point reduction in the Fed funds rate at the upcoming Federal Open Market Committee meeting.
Japan’s economy expanded at a slightly slower pace than initially reported. The nation’s gross domestic product grew by an annualized 2.9% in the April-June quarter from the previous three months. This compares to economists’ median forecast for 3.2% growth.
Japan’s gross domestic product increased 0.7% on a quarter-to-quarter basis in the second quarter, which compares to the estimate of up 0.8%.
INTEREST RATE MARKET FUTURES
Futures are lower now that it appears that the Federal Reserve is less likely to lower its fed funds rate by 50 basis points at the upcoming policy meeting.
There are no Federal Reserve speakers scheduled for today due to the central banks self-imposed blackout period that is in effect in advance of a Federal Open Market Committee meeting.
Currently there is a 75% probability that the Federal Open Market Committee will lower its funds rate by 25 basis points at its September 18 meeting, and there is a 25% probability that the FOMC will reduce its key interest rate by 50 basis points in September.
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